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Could Lucid Group’s stock be an appealing investment opportunity with enormous upside potential?

Author: Investment Intelligence | 22.10.2021

Topics: eToro, Stock pics

What would you say if you had got a chance of investing in Tesla 5 years ago when its stock was trading at about $ 40 and before it skyrocketed to its present hight of $739 per share, as on the day of this publication?

In this article we will take a look at fundamentals of Lucid Group (formerly Lucid Motors), an innovative American automotive company which is on its way of delivering the longest range, fastest charging luxury electric car in the world, which makes some analysts believe that investing in Lucid Group (LCID) nowadays might be like getting back a chance to invest in Tesla a few years ago. The question is could it really be a millionaire-maker growth stock worth buying now?

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Here is the bold vision of the company: “At Lucid, we believe in the dream ahead. Our relentless focus on innovation, luxury, and sustainability moves us toward a future where you no longer have to choose between doing great things and doing the right thing.” (https://www.lucidmotors.com/).

In fact, there have recently been a plenty of allegations that Tesla is going to be outperformed by a brand-new innovative luxury sedan, the Lucid Air, but now Lucid Group started providing some proofs of this. On September 16, Lucid Motors declared that “the results are in, and Lucid Air Dream Edition R has exceeded expectations. With 520 miles on a single charge, it’s achieved a record-breaking official EPA range rating, making it the first electric car ever to breach 500 miles.“ (https://www.lucidmotors.com/stories/lucid-air-achieves-520-miles-of-range)

This means that Lucid Air beats the Tesla Model S Long Range by more than 100 miles, and makes it possible to have longer trips like, for example, from Los Angeles to San Francisco, without stopping.

Company’s CEO and CTO Peter Rawlinson said on that occasion: “I’m delighted that our Lucid Air Dream Edition Range has been officially accredited with a range of 520 miles by the EPA, a number I believe to be a new record for any EV. Crucially, this landmark has been achieved by Lucid’s world-leading, in-house EV technology, not by simply installing an oversize battery pack. Our race-proven 900V battery and BMS technology, our miniaturized drive units, coupled with our Wunderbox technology endow Lucid Air with ultra-high efficiency, enabling it to travel more miles from less battery energy. The next generation EV has truly arrived!” https://www.lucidmotors.com/stories/lucid-air-achieves-520-miles-of-range

Lucid Group’s fastest EV charging system makes it possible to fill up to 300 miles of charge in about 20 minutes. Beyond speed, it’s compatible with nearly every US public charging station and has bi-directional capabilities coming soon.

Lucid Group also impresses the market with other key performance indicators such as a maximum power of 1,111 hp, 9.9 seconds quarter-mile and 2.5 seconds 0-60 mph (https://www.lucidmotors.com/air/performance, https://www.lucidmotors.com/air/specs
Currently, the list of countries where it will be possible to order a Lucid Air covers 18 countries and includes Finland. (https://www.lucidmotors.com/faq).

The recipe of promising success of Lucid Group looks like a combination of critical competitive advantages: a superior innovative technology packed in elegant efficient design, the company’s impressive talent and leadership, as well as Lucid’s branding strategy.
Lucid’s leadership team brings to the company’s Silicon Valley headquarters in California deep knowledge and experience from the automotive and technology industries. In fact, the management team embraces talents from Tesla, Waymo, Apple and other big names.

Lucid’s CEO and CTO Peter Rawlinson, prior to Lucid, has been a Vice President of Vehicle Engineering at Tesla and Chief Engineer of the Model S, where he led the engineering of the Model S from a clean sheet to production readiness.

Lucid’s CFO Sherry House joined Lucid after holding a series of executive finance positions at Waymo, an American autonomous driving technology development company, formerly the Google self-driving car project.

Eric Bach, the Senior Vice President of Product and Chief Engineer, has also worked for Tesla prior Lucid, where he oversaw several engineering functions for the Tesla Model S, Model X, and Model 3 programs. Under his leadership, his teams successfully enabled the Model S and Model X programs to deliver pioneering engineering and technology solutions under vastly accelerated timelines when compared to the industry at large.

Michael Bell, a Senior Vice President of Digital at Lucid Motors, who is responsible for software development, ADAS, and IT, has 16 years’ experience of work for Apple where he played significant roles in the development of iPhone, iMac, AirPort, and Apple TV products.

And yet we named only a few of the Lucid’s great team. This talent also contributes in some investors’ perception that investing in Lucid Group is a strong bet.

The deal of taking Lucid Motors public was announced in February 2021 by Churchill Capital IV — a special-purpose acquisition company (SPAK), which valued the combined entity at a pro forma equity value of $24 billion. https://www.bnnbloomberg.ca/lucid-motors-agrees-to-go-public-with-24-billion-valuation-1.1567196

Overall, going public using a SPAC, also known as a blank-check company, has recently become a popular alternative to a traditional IPO in the USA. It works out this way: the SPAC’s assets are represented mainly by cash, SPAC trade on stock exchanges and then merge with private companies, taking those companies public.

Lucid Motors went public via a reverse merger with Churchill Capital IV on July 26, 2021, when it started trading as Lucid Group under the ticker symbol LCID on the Nasdaq. (https://www.nasdaq.com/articles/lucid-motors-stock-wont-be-this-cheap-for-long-so-buy-it-while-you-can-2021-08-18)

It looks like Lucid Group does not experience a lack of financial resources after completing the merger. On the day of going public, Lucid’s CEO Peter Rawlinson announced: “with the $4.4 billion in funding we now have in the bank, we’re able to significantly accelerate our trajectory while also mitigating our risks in delivering the world’s best EVs.” (https://www.lucidmotors.com/stories/note-from-ceo-on-lucid-going-public)

The company was significantly backed by one of its largest shareholders - Saudi Arabia’s Public Investment Fund (PIF), which investment in Lucid is estimated at $2.9 billion. https://investorplace.com/2021/09/lucid-motors-and-lcid-stock-future-trajectory-is-in-saudi-arabias-hands/

After completion the merger and going public the Lucid Group’s shares climbed 11% in their first day of trading, closing at $26.83. https://www.wsj.com/articles/lucid-motors-shares-climb-in-first-trading-day-after-spac-merger-11627320990. Later on, Lucid’s stock has seen some correction felling 15.9% in August.

According to the Motley Fool, “Most EV have lately seen some correction, attributed to quite a few factors. First, there are concerns relating to a possible delay in the production plans of the EV companies. The concerns, initiated by a global semiconductor shortage, have been aggravated by the spread of the delta variant of COVID-19. Second, a steep rise in EV stock prices last year, as well as in the beginning of this year, has sent their valuations higher. Concerns relating to the high valuations also contributed to the sell-off seen in recent months.

Third, increasing competition in the EV segment has also made investors concerned about the long-term prospects of EV start-ups. Finally, news of accidents involving self-driving features of some EVs have added to investors' long list of worries.

There was no company-specific news from Lucid Group to have caused the fall in the stock in August.” (https://www.fool.com/investing/2021/09/02/why-lucid-group-stock-fell-159-in-august-and-anoth/)

However, on September 1, the stock plunged more, as the lockup period for some early investors expired.

It should be mentioned that Lucid's SPAC deals included a PIPE ("private investment in public equity") which allowed institutional investors to participate in the deal at a favorable share price in exchange for the investors’ commitment to hold their shares for a certain period. The “lockup” expired at the end of August and on September 1 the investors in Lucid's $2.5 billion PIPE got entitled to sell their shares. While some of the investors started exercising their right, the Lucid’s stock plunged on September 1 another 10.9%, providing long-term investors with an appealing opportunity to buy the dip. The closing price on that day was $17.79 (https://www.nasdaq.com/market-activity/stocks/lcid/historical).
Since then, the Lucid Group’s stock has rebounded.


Moreover, Lucid’s stock gained 38% in the last week and has been showing a notable run-up this week even as rivals' stocks have plunged sharply amid concerns about the potential collapse of Chinese real estate company Evergrande perceived as on the verge of defaulting on its nearly $300 billion in debt. On September 22, Lucid Group’s stock closing price was $ 26.81.

Lucid has a market cap of over $30 billion, making it one of the most valuable up-and-coming pure-play EV companies. https://www.fool.com/investing/2021/09/14/why-is-everyone-talking-about-lucid-group-stock/)

It is known that by the time of going public, Lucid had 11,000 paid reservations for its flagship luxury electric sedan, the Lucid Air. Considering Lucid’s average transaction price, 11,000 reservations could be estimated at about $935 million to $990 million in potential sales depending on the product mix https://www.fool.com/investing/2021/07/27/lucid-motors-now-has-11000-vehicle-reservations/

Lucid announced four trims for the Air. The Dream Edition priced at $ 169,000 -plus is the first trim the company planned to start deliveries with in late 2021. Lucid Group is going to move to somewhat downmarket in 2023 with more affordable versions of $77,000-plus Air Pure.
18 months

Lucid has been manufacturing test cars for several months at the company’s factory in Arizona, shaping its expertise and aiming to ensure high quality of its vehicles.

The company has not officially announced the date of beginning production of customer vehicles yet. Some analysts believe that the biggest risk to Lucid is time. The company is expected to prove its ability to efficiently use cash and start generating revenue. https://www.fool.com/investing/2021/09/14/why-is-everyone-talking-about-lucid-group-stock/

However, the investors are obviously expressing a strong interest toward Lucid Group’s stock, inspired by the latest news that Lucid Air Dream Edition R has been officially accredited with a range of 520 miles by the EPA beating Tesla on this, and anticipating soon start of deliveries to the customers this year.

impressive EPA range ratings

Overall, the investors who are interested in Lucid Group might face a choice either to wait till the company starts generating revenues and plays its growth story out, thus minimizing own investment risk, or aim at a higher reward and start position in Lucid Group now before the stock will possibly soar while rolling out and scaling the Lucid Air.


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Picture: Lucid Group Ltd